TMTPost -- China’s top electric vehicle manufacturer BYD Co. Ltd. set a relatively conservative growth target for the year 2024 in face of fierce competition in the EV market.

Credit：Transport Buearu of Shenzhen Municipality

BYD aims to increase its sale by more than 20% on the top of sales volume last year, which represents the annual sales target of more than 3.6 million units this year,  news media outlets at home and abroad cited the chairman and CEO Wang Chuanfu. Out of the annual target, 500,000 vehicles will be sold overseas, more than double last year’s total, and the overseas sales in 2025 to be double from this year to one million units, Wang  said at a meeting to communicate with investors about the financial results of the year 2023.

The annual target Wang revealed suggested BYD expects sales would significantly slow down in the coming year, and its expectation is less aggressive than analysts who generally anticipated BYD would sell around 4 million vehicles in the year 2024, up about 17.3% from last year.

The Shenzhen-based company disclosed last month that it sold 341,043 new energy vehicles (NEVs) , including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), in December.That month was the eighth straight month for BYD to set new record after sales first topped a 300,000-unit milestone in October. Sales from January to December totaled 3.0244 million units with a 61.2% growth from a year earlier, consolidating BYD’s leadership in China. With an annual sales record of more than 3 million units, BYD managed to meet its annual target as chairman Wang said in March 2022 that his company aimed to sell at least 3 million vehicles in 2023.  

Driven by the robust sales, BYD refreshed its annual profit record and maintained leadership of profitability, and kept widening its gap of gross margin between its arch-rival Tesla, Inc. BYD’s net income surged 80.72% year-over-year (YoY) to  RMB30.04 billion (US$4.16 billion) and annual revenue rose 42.04% YoY to RMB602.315 billion. For the year 2023, BYD’s gross profit margin of vehicles popped 2.63 percentage points YoY to 23.02%, beating Tesla’s annual margin of 18.2%.

Despite of cooling sales growth, BYD seems maintain strong performance at the bottom line. BYD is confident of steady profits this year, Morgan Stanley analysts said in a report quoting the meeting with investors, calling it “impressive” against a challenging sector backdrop. In Wang’s opinion, 2024 is the beginning of a knockout competition in China’s auto market. Wang predicted a decisive battle will break out in the automotive industry the next three years, just like previous battles in sectors of the home appliance, the solar energy and the mobile phone. The leader was reported to tell investors that the NEV industry had entered a "knockout round" with a battle in scale, cost and technology to be played out from 2024 to 2026. he believes scale is the most critical for any player who can survive.

Wang said the competition in auto industry is extremely fierce because of oversupply. He saw acceleration of electrification transition to NEVs among established automakers in China these years, and under such setting, BYD should fight together with domestic peers who seek the transition to win market shares from makers of fossil fuel vehicles, especially joint ventures founded by both Chinese firms and their foreign partners. Over the next three to five years, the market share of foreign brands in China will fall from 40% to 10 %, estimated Wang, signaling a 30% share of new room for Chinese brands to grow. He added that not not all Chinese brands can earn the 30% of share that foreign brands will lose, instead, only a few of indigenous brands who boast real cost advantage, scale advantage and technology advantage can survive.

As to BYD itself, Wang said profit margin on vehicles would fall this year as the price war intensifies, but the company would ensure profitability remains stable by improving sales. He disclosed BYD will launch its next-gen hybrid system in May. Fifth-generation DMI technology would enable BYD PHEVs a fuel consumption of 2.9 liters per 100 kilometers (km) and combined range of up to 2,000 km. In terms of globalization, Wang said geopolitical issues require auto companies like BYD to adopt an"overseas + localization" strategy. That’s way BYD and other Chinese car companies need to integrate their technologies into the localization strategy in Europe, South America, the Middle East and other markets abroad, and created two major markets--domestic and international by establishment of overseas facilities.